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Impending end to student loan payment moratorium raises fears among defaulting borrowers | Global Affairs

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The start of the new year weighs heavily on Elizabeth Barber.

The home helper from Penfield, New York, has spent the past few months stretching the $12.89 an hour she earns to cover her mortgage and utilities. But as fewer families felt comfortable inviting a stranger into their home during a pandemic, Barber lost customers.

Now, with barely 25 hours a week and bills piling up, Barber, 60, fears the federal government will start to withhold 12% of his salary again for a delinquent student loan.

“I’m stressed,” Barber said. “My job has changed drastically in just the past two months. …I’m still struggling. I can’t afford to lose any more money.”

A wide range of pandemic relief programs are set to expire Dec. 31, including measures that have frozen student loan repayments and the collection of outstanding federal student debt. Millions of Americans will be sent back for reimbursement. Hundreds of thousands of student borrowers, including Barber, face having their wages garnished just as a resurgence of the coronavirus threatens to create further economic disruption.

President Donald Trump has not committed to extending relief programs by executive order, and a White House spokesman declined to comment on the matter. And congressional Democrats’ attempt to extend the moratoriums until next September 30 is on hold with the latest stimulus bill stalled in the Senate.

President-elect Joe Biden could act when he takes office in late January. But disabling an outdated collection system – which never completely stopped working under the moratorium – could take months and trap some of the most vulnerable borrowers.

“There will be at least a three-week period of complete uncertainty because this is not a system designed to turn on and off,” said Alex Elson, attorney at the nonprofit National Student Legal Defense Network. .

Barber can attest to the bureaucracy of involuntary federal collections. Although the Trump administration imposed the moratorium in late March, the government continued to cut paychecks through May. That month, she became the lead plaintiff in a class action lawsuit that accused Education Secretary Betsy DeVos and the Department of Education of mishandling the federal order and demanded a full suspension.

Legal aid and consumer groups have received dozens of complaints from people like Barber, whose wages were still being garnished weeks after the order took effect.

The Ministry of Education said the matter was largely out of its hands due to the operation of the collection apparatus. Although the federal agency is ordering employers to stop garnishment, businesses must take steps to end it. The department said it had called and emailed employers to stop withholding wages on its behalf, but some continued.

It can take employers weeks to fully process and stop collection, making it essential to send notices as quickly as possible. But some say the Department for Education did not promptly send notices to businesses. People familiar with the matter, who were not authorized to speak publicly, previously told the Washington Post that most emails sent by the department were unopened. And they wondered why the agency hadn’t deployed all the means of communication from the start.

Since employers can be held liable for failure to comply with a wage garnishment order, they are reluctant to act without explicit instruction from the Department of Education.

The court-ordered reports describe a cumbersome system of collecting overdue debts that the federal government could slow down but never turn off. Of the 390,000 people who were involuntarily collected as of March 13 – when Trump declared a national emergency – 15 still had money withheld from their paychecks as of Nov. 12, according to court documents.

In an attempt to shut down the collection system, the Department of Education closed the post office box where employers send payments in late October. From now on, any payment sent to this mailbox will be returned to the sender.

If an employer continues to garnish a borrower’s wages, the Department of Education will refund the money they receive. The ministry said it had returned $186 million to more than 380,000 borrowers through early November.

There are still nearly 24,000 people awaiting reimbursement because the department does not have valid addresses on file. The agency said it emailed borrowers asking them to update their information and was working with the Treasury Department to validate mailing addresses through data matching.

The administrative gymnastics involved in halting wage garnishment is not just an indication of a deeply flawed system, but a troubling reminder of what awaits the Biden administration, consumer advocates say.

“I’m very concerned about a switch being flipped on January 1. Even if it’s off weeks later… are we going to see this whole series of issues again?” said Persis Yu, an attorney at the National Consumer Law Center who represents Barber and other borrowers alongside the National Student Legal Defense Network.

Because it takes employers weeks to make the necessary changes to their payroll processes to start or end wage garnishment, the Department of Education says people are unlikely to see their salary withheld immediately. Still, the federal agency admits some employers could start immediately after the moratorium is lifted.